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Organizational Strategy, Information Systems, and Competitive Advantage

Chapter 3

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Q1: How Does Organizational Strategy Determine Information Systems Structure?

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Strategy Determines Information Systems

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Q2: What Five Forces Determine Industry Structure?

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Competitive Forces

• Competition from vendors who manufacture substitutes

• Competition from new competitors

• Competition from existing rivals

Bargaining Power Forces

• Bargaining power of suppliers

• Bargaining power of customers

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Porter’s Five Forces Model of Industry Structure

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Examples of Five Forces

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Five Forces at Falcon Security

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Q3: What Is Competitive Strategy?

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Porter's Four Competitive Strategies

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Q4: How Does Competitive Strategy Determine Value Chain Structure?

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Linkages

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Task Descriptions for Primary Activities of the Value Chain

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Q5: How Do Value Chains Determine Business Processes and Information Systems?

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Q5: (cont’d)

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Q7: How Do Information Systems Provide Competitive Advantages?

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Principles of Competitive Advantage

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How Does an Actual Company Use IS to Create Competitive Advantages? (cont'd)

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• Maintains customer account data – IS collects information for ABC (adds value)

– IS saves customers time by automatically filling in part of form (adds value for customer)

• Package & information delivery system – IS helps customer to select delivery address and generate

shipping labels

– What value does shipper get?

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Two Roles for Information Systems Regarding Products

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Web Page to Select a Contact from the Customer’s Records

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ABC Web Page to Select a Contact from Customer’s Records

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Web Page to Specify Email Notification

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Web Page to Print Shipping Label

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How Does The Knowledge in This Chapter Help You?

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• Identify key points Falcon Security must address in deciding whether to expand its business beyond security services

• Develop guidance for yourself about relationship between competitive strategy and information systems requirements

• Summarize what you have learned from this example in a statement that you could make in a job interview

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Yikes! Bikes!

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• You are the operations manager for Yikes! Bikes, a manufacturer of high-end mountain bicycles.

• New owners plan to pursue lowest-cost vendor strategy by importing low-cost, lower quality bikes.

• New owners not being honest with employees about cutting jobs.

• Say you might be promoted to new general manager. Should you trust them?

Q: Are the owner’s actions illegal? Unethical?

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Guide: Your Personal Competitive Advantage

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• Who will be your competitors when you seek a job after graduating from college?

• What will be your competitive advantage in the job market?

• What can you do before you graduate to create a competitive advantage for your self?

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Using the Guide: Your Personal Competitive Advantage (cont'd)

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How do these elements of competitive advantage apply to you personally?

• Switching costs? • Differentiating products? • Creating barriers? • Establishing alliances? • Reducing costs, increasing revenues?

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Case Study 3: The Amazon of Innovation

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Case Study 1: The Amazon of Innovation (cont'd)

Three categories of Amazon’s business lines:

1. Online retailing – Own inventory – Associates program – Consignment

2. Order fulfillment

3. Cloud services

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Costs for Fulfillment by Amazon by Type and Size of the Goods to Be Processed.

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Impact of FBA

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• Amazon provides customer service for order processing (handling returns, fixing erroneously packed orders, answering customer order queries, etc.).

• Using Web-standard technology, FBA customers’ order and payment data directly linked to Amazon’s information systems.

• Enables companies to outsource order fulfillment to Amazon, thus avoiding the cost of developing their own processes, facilities, and information systems for this purpose.